Contracting for Previous Employer

[ly05]

A former employer has contacted me regarding a possibility of contract work for an upcoming project for a city entity this April. I am currently on leave from a local county agency (leave ends in March) but I do not plan to be going back. My original plan was either to stop working for family reason, or take on this contract work from my previous employer and work from home.

My previous employer is a civil engineering consulting company. I understand that when I worked there, our contractors, just like consultants would, charged the labor plus mark ups (hourly rate equaling about three times the actual hourly rate to employee). Would this be a reasonable amount to expect from my previous employer (3x my last hourly rate with them)? Any suggestions on what else I should I be looking out for (terms of conditions, etc?)

Thanks.

 

[BJC]

Make sure you are covered under their E & O insurance.

 

[Heckler]

Read Matt's article on going Independent

http://designsmarter.typepad.com/mattlombard/

Best of luck

Heckler
Sr. Mechanical Engineer
SWx 2007 SP 2.0 & Pro/E 2001
XP Pro SP2.0 P4 3.6 GHz, 1GB RAM
NVIDIA Quadro FX 1400
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_`\(,_
(_)/ (_)

(In reference to David Beckham) "He can't kick with his left foot, he can't tackle, he can't head the ball and he doesn't score many goals. Apart from that, he's all right." -- George Best

 

[KENAT]

I'd definitely look at what you need to 'come out even'.

I did something similar but in the industry I was in liability wasn't such an issue and It was for a UK company so health insurance wasn't relevant.

None the less, they tried to give me the equivalent hourly rate to what I'd left on.

I said no, let's adjust it for at least an inflation raise and what you were putting into my pension etc plus I'm working from home so allow for the amortization of the PC I had to buy, electricity etc. With hindsight I probably under charged on my hourly rate but there were other factors so I feel I did OK from them.

I'm not sure that an arbitrary factor is the way to go but definitely make sure you come out ahead. That FAQ may be good place to start.

 

[csd72]

ly05,

The engineering consultancy will be charging you out at 2.5 to three times your hourly rate. If you are working under their umbrella then you cant really ask for 3 times your rate as it mean they would have no return from your work.

If you were working directly with clients (i.e. your company was the consultant) then you would be able to charge the 3xsalary.

To determine your minimum hourly rate:
take 52 weeks times 5 days
- your expected annual leave
-sick leave
- public holidays
multiply by 7.5 hrs a day.
=expected working hours per year

For minimum hourly rate divide your annual salary by the number of expected hours then add allowances for expenses,401K, lack of job security e.t.c.

Unfortunately the margins in the Civil engineering consultant industry are not that high, so you will never get twice your salary unless you work lots of extra hours. (if you know how much they charge you out at then you may be able to get 40% to 50% of that).

 

[tygerdawg]

I'd add to what CSD72 said...

If you read a lot of "How To Be A Consultant" books, they all seem to agree on how to set hourly rates. It's all the "52 weeks per year X 40 hours per week...etc." stuff. But if you assume you are an independent, then you will spend X% of your time marketing (and not getting paid for it). And all of the various and sundry other non-paid time during the course of a year. You have to do the spreadsheet thing and capture all of those time elements.

THEN you have to continue with the spreadsheet thing to identify all of your lifestyle costs. Divide one by the other and that will get you on the right track to your hourly rate.


TygerDawg

 

[GregLocock]

If you are working as a contractor you'll be lucky to make 1.5 times the full time employee's hourly rate, round here. If you are working as a consultant, then multiples up to about 7 have been seen, briefly.

Having said that, I did the 1.5x thing, and then came back permananent on more or less the same, which was neat.




Cheers

Greg Locock

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.

 

[KENAT]

Also remember even if you were going to bill for all the time you work including networking etc are you really going to work 5 days a week 52 weeks a year?

My guess is by the time you take out public holidays and at least a week or two for vacation or sick time or just when you need to do non work errands etc I doubt if you'll work the equivalent of 48 5 day weeks.

 

[IRstuff]

As a contractor, you're self-employed, which means that you'll be paying for essentially double on Social Security and Medicare taxes, if your'e in the US. 1.5x is probably a good compromise. One big plus is that you can bank more of your money before taxes into a 401K-ish plan

TTFN

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[Ashereng]

Most employers using contractors have a "standard" contract. All of the employers that I have contracted with have had one. With very few minor changes, they are pretty much the same. I really have not had a problem with the contract side of things.

I have my own company. My company signs the contract with my client. Therefore, I provide my own insurance, registrations, overhead (eg computer, software, etc) and so on. If you are a contract employee, then you most likely would not provide your own insurance, overhead and etc. I am not sure which way you are going.

I ask for the rate that I believe I am worth within my industry, regardless of what I earned before. Times change, projects change, and also what my clients are willing to pay changes. You need to know what is the going rate is to maximize your income, and not be priced out of getting the work. I don't know about your industry, be 3X your salary as an employee seems excessive. In my industry, 1.5 seems more reasonable.

"Do not worry about your problems with mathematics, I assure you mine are far greater."
Albert Einstein
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